Commercial Real Estate News / Buying / Navigating the Flex Maze: A Guide to Choosing the Right Flex Industrial Space

Navigating the Flex Maze: A Guide to Choosing the Right Flex Industrial Space

Published: 06-18-24 Category: Buying

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If you're on your way to launching a startup or ready to expand your e-commerce business, you may be ready to begin looking for commercial space with the flexibility required for your growing needs.

Flex industrial space may be the ideal solution. In addition to start-ups and e-commerce retailers, small businesses that are ready to expand beyond the owner's garage or workshop often transition successfully to flex industrial.

Here, we'll explore the different types of flex space in detail before guiding you through the process of choosing the right one for your business. You'll also receive tips for negotiating lease terms.

Before you begin your search, here are some of the types of commercial real estate (CRE) to familiarize yourself with.

Types of Flex Industrial Space

No matter what your business is, one of the following types of flex industrial properties may very well be the ideal venue.

#1 – Light Manufacturing

These spaces are designed for businesses that engage in assembly, packaging, or light production.

Typically, tenants who require flex industrial space for light manufacturing produce items such as clothing, consumer electronics, and furniture.

They prefer open floor plans, high ceilings, and a mix of office and manufacturing areas.

#2 – Warehouses With Office Space

Created for businesses that require storage and distribution functionality, these combine warehouse facilities with separate office areas for administrative and managerial tasks.

E-commerce businesses, primarily those active online and within social media, are often found within a flex industrial facility with combined warehouse/office space.

Buildings that have been upgraded with smart features for more accessible inventory and shipping tasks are particularly popular.

Food service businesses that prepare and ship ready-to-cook meals often seek combined warehouse/office space with cold storage for their products.

#3 – Showroom Space

These are popular options for businesses that need to showcase examples of their product lines, such as furniture, sporting goods, and appliances.

They offer storage and display areas, usually with one attached office.

#4 – Research and Development (R&D)

Flex industrial buildings are often leased by companies active in carrying out R&D in the biotechnology industry.

These spaces often require unique build-outs, generally requiring secure testing areas and climate-controlled storage.

#5 – Workspace Studios

These are some of the smallest flex industrial spaces available. They are often the first step up for craftspeople who previously worked from their homes.

Depending on your space requirements and budget, other configurations may be available.

Before you begin a serious search, you must take several steps to determine the ideal square footage, location, amenities, and high-tech features for your business.

We've broken down these steps below so you can review them with any partners and incorporate them into a working business plan.

Essential Steps to Leasing the Ideal Flex Space

Before you begin, decide whether you will complete these on your own or need assistance from a business associate or partner.

If this is your first foray into business leasing, don't hesitate to ask for help or a second set of eyes on your finished business plan.

Step 1: Assess Your Business Needs

Consider factors like square footage, location, and desired amenities. Staff numbers and product knowledge will help you determine these.

If you'll be shipping goods from your space, maintaining an inventory, or both, you'll need to determine locations and costs of transportation options. For example, will you be relying on air freight shipping or ground services?

Step 2: Determine Your Budget and Future Expansion Plans

This will help you ensure the space can accommodate growth. This should include projected revenue, fixed costs, variable costs, and resulting profits.

Initial startup budgets will have additional costs, such as initial inventory and the costs of furnishing your commercial space. It's also a good idea to consider contingency funds for unexpected circumstances.

Step 3: Evaluate and Compare a Typical Flex Industrial Space's Features

These include the following:

Ceiling Height: Ensure the space has adequate height for your operations, especially if you require vertical storage or machinery.
Dock Doors: Assess the number and type of dock doors available for efficient loading and unloading.
Power Supply: Verify that the electrical infrastructure can support your equipment and technology needs.
Security Features: Look for spaces with secure access points, surveillance systems, and fire safety measures. Ideally, these offer equal protection for your inventory and staff members.

Consider how your business and staff would function within each set of features, and make detailed notes of your final choices.

Step 4: Consider the Location's Accessibility

This goes for your employees, plus customers and suppliers if applicable.

For example, while an e-commerce business location may not serve customers directly, a business that customizes cars should offer reasonable access to customers dropping off and picking up their vehicles.

After you've completed these steps, it's time for a coffee or matcha break before you decide on dates and times you're available for touring flex industrial spaces.

Before you begin, it's a smart idea to consider the lease terms that are best for your business and to make written notes of these.

Negotiating Lease Terms

Almost every commercial real estate (CRE) lease will contain the following sections, options, and clauses.

Lease Length: Aim for a lease term that aligns with your business plans and provides flexibility for growth.
Rent and Escalations: Understand the base rent, any escalations, and additional costs like maintenance fees or utilities.
Tenant Improvements: Negotiate any necessary modifications or upgrades to the space before signing the lease.
Renewal and Termination Options: Discuss the terms for renewing or terminating the lease early, if needed.
Pricing structure: These begin with a base rent per square foot. Some leases may include additional costs, such as Common Area Maintenance (CAM) fees for shared facilities, utilities, property taxes, and insurance.

Be sure to clarify what is included in the lease price to avoid unexpected expenses.